Q2.
International Brands Ltd. Is operating at 60% capacity andproducing 2,700 pieces of product A. The cost of production for themonth of August 2012 was:
Rs.
Direct Material 54,000
Direct wages 8,100
Variable Overheads 9,900
Fixed Overheads 18,000
The products are currently sold at an average price of Rs.72.
A tender for supply of 900 pieces per month has been received.To submit tender the following information has beenascertained.
• Variable Overheads attributable to various activitylevel is:
% Per monthRs.
50 8,280
60 9,900
70 11,520
80 13,500
90 15,300
100 16,920
Required: (Mark 5)
(a) Calculate the bidding price which will yield a10% profit.
(b) Prepare a statement showing the effect on themonthly profit if the company’s tender is accepted.
